When it comes to property development in London, there are some financial solutions to consider for your project.
With almost all property development projects in London, some help will be needing financially from a lender to either help kick start the project or finish it off.
If you are in the situation where you need financial help for property development, then this is the right article for you.
What Are Finance Options Available For Property Development?
There are a few different options available to help financially with property development projects from bridging loans for property development to commercial mortgages.
With most of these options, you will need to provide evidence of the property purchased and what the property development plans are and be assessed to for approval of financial help.
Below, are some of the different finance options available for property development:
If you have a lot of money available to you, this can be used towards property development. This option will not be doable to many people, especially when starting in property development, but it’s something to keep in mind for future projects.
- Buy-to-let mortgage-
If your property development project is a property that has been bought, to be rented out, then you will need a buy-to-let mortgage.
Most standard mortgages have a term where you can’t rent the property out, which is why you would need a mortgage that gives you this option.
As it is a property development, it is most likely that the property that has been bought or developed is either being sold or rented out once complete.
Find out more on buy to let mortgage
- Buy-to-sell mortgage-
If you have purchased or are developing a property to sell it then, you will need a flexible or buy-to-sell mortgage.
The great thing with this type of mortgage is that there are no redemptions fees and no limit on how quick the property can be sold.
For those in property development, this is great as you want to sell the property as soon as it is complete.
However, depending on how much the property needs renovating, will depend on whether a property developer can get this type of mortgage.
- Bridging loans-
A bridging loan for property development is not a mortgage, but a short-term loan and is great for a property developer that wants to buy, renovate and sell and may not be eligible for a buy-to-sell mortgage.
The short-term loan can be paid back in as little as 2 weeks and up to 12 months.
An assessment with the lender will take place where they will discuss what assets you have for security, how much needs to be borrowed, what the money will be used for and an exit strategy.
The great thing about bridging loans for property development is that they can get them quickly, to help them out with their project, and once the project is complete, they can use the money from the sale of the property, to pay back the short-term loan.
- Property development finance-
Property development finance in London is targeted at developers and builders, to help them financially with lending a large amount of money for the property development project.
For property development finance, you would need to prove to the lender that you are an experienced builder or developer along with evidence of purchasing the property, the plans for the property development and what the money will be used for with the development.
Property development finance is great for those that are developing a property as large amounts of money can be borrowed and paid back in a short amount of time.
This means that they can take out the property development finance, use the money to finish off the project, sell the house quickly and then pay back the finance, whilst also making a profit on the property.
Find out more on development finance
- Personal loan-
If you already own a property and need some extra money to help renovate it, then you can take out a personal loan between £1,000 and up to £50,000 that can be paid back within 1-8 years.
What Is The Best Option Financially For Property Development?
When it comes to choosing the best option for property development, it comes down to how quick you want the money, how quick you can pay it back and what option you would prefer to go down, if it’s possible.
The mortgages that can be taken out are subject to you owning a property, that will then be used for renting or selling.
The mortgages for these are usually paid back over a long time, and they have terms with them, which mean they are not available to all property developers.
Some will state that they can’t be used for large renovations, so you may struggle to get a mortgage through this way, with being a property developer.
Bridging loans for property development and property development finance are great ways to get money quick and pay it back quickly.
The bridging loan for property development is a quick and easy way to get the money you need for the development project.
With this type of loan, an exit strategy and security is needed. This is where the property can be used. As it is a property development, the security is the property, and the exit strategy is selling the house, once completed, and then paying back the loan.
Property development finance is also great for this as it’s also a quick process directed at develops and builders, to enable them to get large amounts of money to help with the project.
The lender sees the property development finance as an investment, and they will work out the gross development value, to determine how much they will be willing to lend you, to help you out with the project.
It then gets paid back in a short time, and when selling the completed property, some of the money can be used to pay the finance back.
If you want a quick solution and financial help for property development, bridging loans or property development finance are the best options for you.